Postal Rate Hike Much Higher This Time

What was the most dreaded and feared is now becoming a reality. The rumored and highly talked about postal rate hike is finally coming to fruition. But this time, the postal rate increase will be higher than last January’s. How high? Here’s the juicy details.

The Postal Service has filed for a rate case to the Postal Rate Commission, seeking an overall rate increase of 8.5 percent and an average increase of 9 percent for Standard Mail. That’s quite a hike from last January’s postal rate increase of 5.4 percent. So basically, postal rates for First-Class went from 37 cents, to 39 cents – and now 42 cents. This latest hike is intended to offset rising fuel and energy costs, as well as increasing health care costs.

But mailers can breathe a tiny bit easier – the new postal rate increases are not expected to happen anytime soon, at least not before May 2007.

Here’s what USPS proposed as average increases based on class of mail:

* First-Class 7.1 percent
* Standard Mail 9 percent
* Periodicals 11.7 percent
* Package Services 13.4 percent
* Priority Mail 13.8 percent
* Express Mail 12.5 percent
* Special Services 11.2 percent

In addition to its rate case filing, the USPS is proposing new pricing initiatives to encourage the use of bulk mail. The current pricing structure for postal products relies heavily on a weight based system. The new plan – sent to the Postal Rate Commission as part of the 2007 price adjustment proposal package – combines weight with shape to allow the USPS to better align prices with processing costs to ensure every type of mail covers its costs.

Right now, current Postal Service prices don’t distinguish between some letters, flats and parcels. For example, in First-Class Mail, the current single-piece is 63 cents to mail a 2-ounce letter, a 2-ounce flat and a 2-ounce parcel. The new plan recognizes that each of these shapes has substantially different processing costs and should have different prices.

That’s why the new pricing plan creates an adjustable rate system by giving mailers the chance to obtain lower rates as they find ways to configure their mail into shapes that reduce processing costs for the Postal Service. For instance, if the contents of a First-Class flat can be folded and placed in a letter-sized envelope, the mailer can reduce the postage by as much as 20 cents per piece. If a First-Class parcel can be configured as a flat, the mailer can save 36 cents.

As the Postal Service emphasizes shape in its pricing, it also proposes to reduce the additional ounce rate. As mail pieces become heavier, the proposed price increase declines. For letters over one ounce, the new prices are actually lower than today’s prices. Think – the heavier, the cheaper.

Perhaps in an effort to soften the blow by rising postal rates, the USPS also proposed a “forever stamp” as part of a broader rate adjustment plan that would be slated to go into effect next year. Its purpose is to allow customers to purchase a special First-Class stamp which would be good for any future single-piece First-Class mailing, no matter how prices might change beyond 2007.

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